STMicro Teams Up with Alien

Nov 19, 2002—Nov. 19, 2002 - STMicroelectronics, the world's third largest semiconductor company, on Nov. 12 signed a letter of intent to form a strategic partnership with Alien Technology, a startup based in Morgan Hill, Calif., that has developed technology for assembling billions of RFID tags. The deal, which is expected to be announced within a week, creates another source of low-cost chips for Auto-ID Center-compliant RFID tags.

The letter of intent spells out a broad strategic relationship and a timetable for moving forward quickly. Management and engineering teams from the two companies will meet in December to begin dividing up responsibilities. The meetings will likely work out targets for when milestones should be reached, including when the two companies will begin producing chips together.

Under the terms of the deal, STMicro, which had $6.4 billion in sales in last year, will begin selling a version of Alien's chip using conventional pick-and-place assembly technology. This helps ensure that there will be an adequate supply of RFID tags built to the Auto-ID Center specification available to large end-users that want to run pilots in 2003.

STMicro and Alien will collaborate on the creation of a more advanced chip – the Auto-ID Center's Class 2 chip -- and STMicro may help improve the design of the existing Class 1 chip. Right now, Alien is the only company that is creating RFID tags with the Auto-ID Center's Class 1 chip specification.

"Alien has been a pioneer in the area of RFID, so they have detailed knowledge of the chip design and the antenna design," says Francis Dell'ova, manger of STMicro's contactless business unit. "ST has a lot of experience with assembling chips on flexible substrates for smart cards, and we have the capacity to support very large volumes at very low cost. So the agreement to work together to makes sense."

STMicro may improve upon Alien's current chip design, by simplifying the security algorithm and tweaking other elements, which could improve performance, Dell'ova says.

At this point, it is not clear if the agreement is exclusive, or if it will include an equity investment in Alien by STMicro. The two sides will work out those details over the next couple of months. The companies expect to sign a formal agreement in January.

STMicro and Alien had discussions last year. As a result of those talks, STMicro decided to join the Auto-ID Center in June. But the two sides never came to an agreement on how they might cooperate. The discussions were restarted in October of this year.

Alien has been designing its own integrated circuits based on a specification developed by researchers at the Auto-ID Center. Advanced Micro Devices produces the wafers, which Alien cuts into tiny NanoBlocks and assembles on to a substrate using its patented fluidic self-assembly process. The deal with STMicro gives Alien a powerful partner that can guarantee a steady supply of wafers.

Dell'ova says STMicro and Alien will bring their own strategic partnerships into the development effort. Alien, for instance, has a partnership agreement with a Finnish company called Rafsec Oy, which has developed a high-speed metallic printing process for creating low-cost antennas.

Separately, STMicroelectronics has partnered with Fujitsu to develop a new smart card chip aimed at the contactless card market. The new chip will use Ferro-electric RAM. FRAM chips are faster and consume less power than the conventional memory chips used in smart cards. That could boost the performance of contactless cards.